MomentumOptions.com Pre-Market for 2/14/2018
Bulls Get Hat Trick
8:00am (EST)
The market traded higher for a third-straight session after showing late afternoon strength following first half weakness. The action remains slightly bullish as the major indexes continue to push near-term resistance levels.
The Nasdaq gained 0.5% after testing to an intraday high of 7,025 while closing back above the 7,000 level for the first time in four sessions. The Russell 2000 advanced 0.3% after testing a high of 1,494 while failing near-term resistance at 1,500.
The S&P 500 rose 0.3% after making a run to 2,668 but the lower high than Monday’s 2,672 print was a slightly bearish development. The Dow added 0.2% after trading up to 24,705 but remains over 1% away from clearing its 50-day moving average.
Energy and Materials were the only sector laggards after falling 0.4% and 0.3%, respectively. Real Estate was up 0.7% to lead sector strength followed by Utilities, Consumer Staples and Consumer Discretionary which were higher by 0.5%.
In economic news, the NFIB Small Business Optimism Index rose 2 points to 106.9 in January after falling 2.6 points to 104.9 in December. The January reading is just off the 107.5 print from November, which was the highest since 1986. A record number 41% of respondents said it was a good time to expand, and that they expect the economy to improve, up from 37% in December.
U.S. household debt increased $193 billion, or 1.5%, to $13.15 trillion in the fourth quarter of 2017 and marked the fifth consecutive year of positive annual household debt growth. There were increases in mortgage, student, auto, and credit card debt as they increased by 1.6%, 1.5%, 0.7% and 3.2% respectively.
U.S. chain store sales jumped 1.8% to 116.5 in the week ending February 10th, following the 1.9% drop in the prior week. Consumer staples paced the strength, led by grocery store sales, along with dollar and drug stores. However, the 12-month pace slowed to 1.6% year-over-year, versus 2.7% previously, and represented the lowest rate since late November 2016.
The VelocityShares Daily Inverse VIX (ZIV) was weak throughout the session while testing a low of 65.35. Upper support at 65-64.50 held with a move below the latter signaling upcoming market weakness. Lowered resistance is at 67-67.50.
RSI appears to be rolling over with resistance at 30 holding. This area also represents prior November support with risk to 25-20 on continued weakness.
The Spiders Dow Jones Industrial Average ETF (DIA) traded higher for a 3rd-straight session following an intraday push to $247.25. Lowered resistance at $247.50-$248 held with a move above the latter getting $250-$251 and the 50-day moving average in play. Support is at $245-$244 with a move below the latter being a bearish development for a continued backtest to lower lows.
RSI is trying to hold near-term support at 40 with continued closes above this level being a bullish signal for a possible push towards 50 and prior September support.
The Real Estate Select Sector Spider (XLRE) traded to a high of $30.48 intraday with near-term resistance is at $30.25-$30.50 holding. Support is at $30-$29.75 with a close below the latter signaling additional weakness.
RSI is in a slight uptrend with resistance at 40. Continued closes above this level would be a bullish development for a possible run towards 50. However, the 50-day moving average remains in a downtrend and is poised to fall below the 200-day moving average over the near-term. This would form a death cross and is usually a bearish development for lower lows.
While the current action appears very bullish, there are still a few technical indicators I follow that are still bearish. There are literally hundreds of stocks sandwiched between their 50-day and 200-day moving averages and it has been frustrating trying to enter long positions as the rebound is still a little early to trust.
I have mentioned prior pullbacks have been followed by swift rallies. With regular February options expiring this Friday, there is a chance volatility heightens going into the weekend. However, positive Friday and Monday closes tend to show money is moving into the market.
The good news is we remain in prime positions to add a plethora of new trades based on the next short-term trend but we need to see higher highs come into play over the next day or so along with an up Friday. Otherwise, try to stay patient as we wait for confirmation.
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I feel pretty confident that the website and Text Alerts are nearly 100% complete. I apologize for the slight delay as I wanted this wrapped up last month but we are getting there. If you haven’t signed up for text alerts also email me with your digits.
Momentum Options Play List
Closed Momentum Options Trades for 2018: 5-5 (50%). All trades are dated and time stamped for verification. New subscribers can look at the past history to see how the trades have played out or to research our Track Records.
Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades. Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the 8am and 12pm–2pm (EST) updates. Also, I will usually give you a heads-up if I think I’m going to send a Trade Alert outside of these time frames.
Viavi Systems (VIAV, $9.72, flat)
VIAV March 10 calls (VIAV180316C00010000, $0.30, flat)
Entry Price: $0.45 (2/6/2018)
Exit Target: $0.90
Return: -33%
Stop Target: None
Action: Support at $9.50 held on yesterday’s backtest to $9.63. Resistance remains at $9.75-$10.
Marvell Technology (MRVL, $22.32, up $0.40)
MRVL May 24 calls (MRVL180518C00024000, $1.00, up $0.15)
Entry Price: $0.83 (2/6/2018)
Exit Target: $1.70
Return: 20%
Stop Target: 85 cents (Stop Limit)
Action: Set an initial Stop Limit at 85 cents to start protecting profits.
Fresh resistance is at $22.50-$22.75 following yesterday’s run to $22.36. Rising support is at $22.25-$22.
